Advisers have expressed scepticism about the government’s plans to offer a £1,500 pension advice allowance.
In plans unveiled on 3 February, HM Treasury has said savers will be able to access £500 a year for a maximum of three times to pay for financial advice.
But advisers have questioned whether £500 a year would be sufficient to do anything meaningful for a client.
Ben Sear, managing partner of Martin Redman Partners, said the allowance would be more helpful if the £1,500 could be taken in one go.
He said: “I think the concept is admirable but the delivery is flawed because I don’t think we as a business could review pensions for £500.
“We have just done a review where we had to review six pensions. You cannot review six pensions for £500 – with the time it takes to get the details, understand them and report back.
“£1,500 would come far closer to paying someone to do the job they needed to do.”
Steven Robinson, an adviser with Clarke Robinson, said: “For £500 I could probably give four hours, which would allow me to have a meeting, write up some of the details and have another meeting to explain it.”
The allowance will come into effect in April and HM Treasury decided to increase the total amount, up from a single £500, after a consultation period.
It also decided to remove the age limit, meaning the allowance will be available at any age.
Darren Cooke, director of Red Circle Financial Planning, questioned whether even using the allowance would be the right choice for some people.
He said: “There are unfortunately always going to be a large number of people for whom financial advice will be desirable but not affordable.
“If you have got a very small pension of £10,000 then that is going to have to be some serious advice to add 5 per cent or more of your pension pot back.”
However Richard Ross, director of Chadwick’s, said it was “better than nothing” and said it could bring about change in the advice industry.
He said: “By effectively setting a target price the government will encourage the creation of more efficient advice delivery mechanisms.
“My observation is that, counter to the widely held belief, the primary reason for the high cost of advice is not regulation per se but adviser inefficiency.
“This measure could be the catalyst that starts an advice revolution. One thing is plain, the advice market for those with modest resources is dysfunctional and a change of approach is long overdue.”
Pension providers have warned they may not be able to deliver on the government's £1,500 advice allowance, raising questions over whether the measure is workable.
FTAdviser contacted a range of major pension providers to find out whether they would be able to offer the service to all their members from the April 2017 launch date.
Not a single provider said they would be able to facilitate savers dipping into their pensions to pay for advice by April, without including caveats.
The majority of providers FTAdviser spoke to warned a large portion of members would be excluded immediately due to the complicated structure of existing policies.
damian.fantato@ft.com
